Theresa May’s plans to curb immigration after Brexit could result in businesses collapsing and jobs being lost, the head of the CBI warned.

Carolyn Fairbairn said measures aimed at restricting low-skilled immigration could be as damaging to the economy as the oil price shock in the 1970s.

The CBI director-general also warned about the impact of a no-deal Brexit, claiming it would require “dramatic decisions” about what urgent supplies were able to arrive through Dover.

The Prime Minister used her speech at the CBI conference in November to claim her new immigration system would stop EU workers being able to “jump the queue” to get into the UK and would

instead be based on skills rather than where migrants come from.

She later said: “I should not have used that language in that speech.”

Ms Fairbairn acknowledged there were”real issues of public trust in the immigration system” and the need to improve training for British youngsters.

But she told The House magazine: “We do have real concerns about a rhetoric and a policy from government that appears to be shutting off, or indicating they will shut off, all so-called low skilled people coming into the UK.

“The impact of doing that would be so damaging for our economy and I think it is underestimated how big a shock that would be. Some have equated it to the oil price shock of the 1970s.”

If the change happened “overnight” it would see “businesses go under and we would lose jobs rather than create jobs for our population”.

She added: “I do think we need to be incredibly careful about the language we use.

“The idea that we would be talking about EU workers in our country in derogatory terms I think is something that certainly our business community would really like to see stop.”

The CBI has repeatedly warned about the prospect of a no-deal Brexit.

With the vote on Mrs May’s Brexit deal looming on December 11, Ms Fairbairn said: “What business is saying to parliamentarians is this is a moment to make hard choices, to put pragmatism and jobs and employment and growth ahead of ideology and go for a compromise that delivers much of what we need.”

On the possibility of a no-deal outcome, she said: “We know that there would be constraints, particularly on Dover, and there could be up to 80% capacity restriction.

“What gets through? Is it fresh food, in which case what does that mean for automotive parts? What do we do about pharmaceuticals?

“We know that the chemicals to purify our water industry only last for six weeks and can’t be refrigerated.